On November 20, 2014, the Commission issued an order accepting the Five-Year Performance Assessment of the North American Electric Reliability Corporation (“NERC”).  In its order, the Commission concluded that NERC continued to meet the qualifications necessary for certification as the Electric Reliability Organization (“ERO”) of the United States, and issued additional compliance directives for NERC going forward.

With regard to compliance monitoring and enforcement, the Commission noted NERC’s increased commitment to these roles, manifested by a marked increase in resources devoted to these specific functions.  For instance, the Commission stated that while the NERC and the Regional Entities’ approved business plans and budgets for 2009 provided for approximately 158 full-time staff in the compliance monitoring and enforcement programs, this number had increased significantly to 303 for 2014.  The Commission also described the efforts made by NERC and the Regional Entities to prioritize and reduce their outstanding pre-2012 violation caseload, and emphasized its expectation that violation processing time and violation age would continue to decline in the future.  The Commission also expressed concern in the area of violation recidivism, finding that it was not currently clear whether or not NERC’s compliance monitoring and enforcement programs were effective in reducing repeat violations in a meaningful way.  To this point, the Commission directed NERC to include an analysis of repeat violations in its next performance assessment.

With respect to funding, the Commission affirmed NERC’s current method of allocating fees on load-serving entities based on net energy load, finding it to be a “reasonable and equitable allocation method.”  The Commission also found that its annual approval of the NERC and the Regional Entities’ business plans and budgets continued to be a sufficient mechanism to ensure that the charges assessed remained reasonable. 

Additionally, the Commission found that NERC had adequately demonstrated that it is improving the quality of its overall activities, as required by FERC Order No. 672.  More specifically, the Commission commended the recent adoption of the ERO Enterprise Performance Metrics by the NERC Board of Trustees, and directed NERC to include specific performance metrics in its future performance filings.

The Commission also commended NERC on the improvements in the efficiency of its Reliability Standards development process, noting that in its performance assessment, NERC reported that the average time for revising an existing Reliability Standard and developing a new Reliability Standard fell from a historical baseline of 27 and 40 months, respectively, to a period of 6 and 10 months.  As a level of enhanced granularity in measurement, the Commission directed NERC to track, on a prospective basis, actual project completion times as compared to estimated time for completion at the outset of a given project, and incorporate these more specific measurements into future performance assessments.

A copy of the Commission’s order may be found here.